Dow jumps 220 points, rebounds from worst week since October as market looks past trading mania
Stocks jumped on Monday, the first session of February, as Wall Street appeared to shake off concerns about a speculative retail trading mania that largely drove the market’s worst weekly sell-off since October.
The Dow Jones Industrial Average rose 229.29 points, or 0.8%, to 30,211.91, led by Microsoft and Visa. The S&P 500 climbed 1.6% to 3,773.86, posting its best day since Nov. 24 as all 11 sectors gained. The Nasdaq Composite jumped 2.6% to 13,403.39.
GameStop, the brick-and-mortar video game retailer that has been the center of attention on Wall Street, fell 30.8%. Last week, the popular stock among retailer investors on Reddit forum WallStreetBets soared 400% amid extreme trading volume and volatility. AMC Entertainment — another short squeeze target that jumped 277% last week — closed flat on Monday.
Many on Wall Street were spooked by a frenzy of activity among retail traders in heavily-shorted stocks including GameStop and AMC Entertainment, which caused hedge funds to take off risk across the board even if they weren’t directly involved in the trade. Goldman Sachs said that the short squeeze triggered by the buying spree is the most extreme in 25 years. However, some strategists believe it’s unlikely that the impact will ripple through Wall Street and derail the new bull market.
Meanwhile, a group of 10 Republican senators sent President Joe Biden a letter on Sunday, urging him to consider a smaller, scaled-down Covid-19 relief proposal. His current plan calls for $1.9 trillion in additional fiscal stimulus.
The Republican proposal would reduce the size of a new round of checks Biden wants to send to Americans, from $1,400 per individual to $1,000. It would also make the income limits that determine eligibility for the stimulus payments far stricter. For individual filers the checks would start to phase out for those making more than $40,000.
The alternative proposal comes after House Speaker Nancy Pelosi said the chamber will move to pass a budget resolution, the first step toward approving legislation through reconciliation. The process would enable Senate Democrats to approve an aid measure without GOP votes.
Reference: CNBC
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